Sinosteel Clears the Air on Midwest Deal

Submitted by Craig Strzelecki on 28 May, 2008 - 13:18

Sinosteel claimed today that it has got a nod on the Midwest deal and it shall not have to get a re-endorsement from Foreign Investment Review Board on combined take over of Midwest-Murchison Metal group. It also distanced itself from last weeks comment from one of its senior executives regarding improvement of its $6.38 a-share bid.

Murchison Metals launched a new merger proposal for Midwest Corp. Murchison Metals and its advisor Gresham Partner announced at a press conference that they have structured a proposal to merge with Midwest Corp as a reverse take over. However, China’s state owned Sinosteel continued with its assessments that it shall not have to reapply for any fresh approvals for the deal.

According the new merger proposal, it would prevent Sinosteel Corp from using its 20 percent Midwest shareholding to block any other rival takeover. The new merger proposal shall dilute Sinosteel Corp shares to 9.45 percent of the capital. The market was taken aback with the announcement of reverse takeover of Murchison Metals by Midwest Corp where Murchison shareholder would be still holding 52 percent share of the company.

If the case is endorsed by the court, then Sinosteel Corp may be denied its approval it obtained in January earlier this year. Currently, Sinosteel Corp has an approval to buy 100 percent of Midwest. The fresh approval may be required in case if the “details are changed significantly” after the takeover of Murchison Metals by Midwest.

On the other hand, things had been unsettled at Sinosteel Corp as well. A senior Australian executive, Mr. William Ren, had earlier suggested at the mining conference in Perth on Friday that the company shall not improve its $6.38 a-share bid for Midwest. Under the Australian Securities and Investment Commission’s “truth in take overs”, such a comment can be taken as “last and final” qualification from Sinosteel Corp. It also implies that Sinosteel Corp shall not have any further provisions for improving upon its bids.

Sinosteel waited for three days to finally clear the air. It issued a statement stating, “Sinosteel notes comments attributed to Mr William Ren, an employee of Sinosteel Australia, that have appeared in the Australian press. Mr Ren is not an official spokesman for the transaction and his comments were based on his understanding of public information and should not be taken as indicative of Sinosteel's intentions. Sinosteel reserves its rights and will consider all options in its response.”

Murchison Metals shares closed at $4.23 which was 20 cents lower than previous day close. On the other hand, Midwest gained at the stock market to close 3 cents higher at $7.03.